Farmers’ confidence takes a tumble
esther.taunton@stuff.co.nz
They’re set for their third good year in a row but New Zealand farmers are the gloomiest they’ve been since the global financial crisis, a survey shows.
It’s shaping up to be a profitable year for the agricultural sector, with many factors that worked in farmers’ favour last year set to continue, according to Rabobank’s latest Agribusiness Outlook.
‘‘The weather has been highly favourable for the agricultural sector in recent months and the outlook for the foreseeable future looks benign,’’ Hayley Gourley, Rabobank’s New Zealand country banking general manager, said.
‘‘Commodity prices for New Zealand’s main agricultural products are also strong at the moment, and, while prices for some commodities are set to soften modestly in 2019, others should strengthen.’’
The New Zealand dollar was also expected to drift lower over the year, bringing the prospect of the lowest average annual exchange rate against the US dollar this decade, Gourley said.
However, a survey of farmers found many were still pessimistic about the economic outlook.
Federated Farmers’ Mid-season Farm Confidence survey found just 5 per cent of respondents expected general economic conditions would improve over the next 12 months, while 46 per cent expected things to get worse.
‘‘The survey found the lowest level of confidence in the economy since July 2009, when we were just emerging from the global financial crisis,’’ the federation’s vicepresident and economics spokesman, Andrew Hoggard, said.
‘‘As with the wider business community, I think we’re seeing concern about the impact of global uncertainty and instability on our key export markets, with the likes of Brexit and US-China trade relations.’’
Those concerns were echoed in the Rabobank report, where the positive forecast came with a warning that risks in foreign markets were mounting and had the potential to end the sector’s unusually long winning streak.
A slowdown in the Chinese economy and disputes between key trading partners posed the most significant threats to New Zealand agriculture in the year ahead, it said.
RaboResearch general manager Tim Hunt, the report’s lead author, said lower economic growth in China was a particular concern given they were New Zealand’s largest trading partner for agricultural products.
‘‘The Chinese economy grew at its slowest rate since 1990 in the closing quarter of 2018 and while the official growth rate was still 6.6 per cent, many analysts, including our own, believe the deceleration is far greater and risks worsening through the year.
‘‘Meanwhile the UK and the EU have to sort out Brexit. And with a no-deal departure a distinct possibility, there is a real risk of a calamitous exit with heavy impact for two of New Zealand’s key markets,’’ he said.
Hunt said that the potential for an escalation in the US-China trade dispute was another threat, as were the flow-on effects of a possible US recession and crashing Australian house market.
On the domestic front, the report said cattle disease Mycoplasma bovis remained a key risk but signs were positive the battle against the disease was being won.
Regulation and compliance costs remained the greatest concern for farmers surveyed, while difficulty recruiting staff was another concern.
Forty per cent of respondents to the Federated Farmers survey saying they had found it harder to recruit skilled and motivated staff over the past six months as opposed to easier.
While that could reflect seasonal factors, it was also driven by the generally tight labour market and immigration restrictions, Hoggard said.
‘‘Dairy and arable farmers have found staff recruitment particularly hard,’’ he said.
‘‘This indicator has steadily worsened over the 10-year life of the survey and is at a record level of difficulty.’’
About 56 per cent of those surveyed were making a profit, down from 62 per cent last July, while 9 per cent were running at a loss and 32 per cent were just breaking even.
Just 18 per cent expected that farm profitability would improve over the next 12 months, while almost a third expected things to get worse.
‘‘Meat and wool farmers continue to be the most positive about their current profitability, and their sentiment improved a little since July,’’ Hoggard said.
‘‘But dairy has worsened – no surprise given the fall in dairy commodity prices and farmgate milk price forecasts in the second half of 2018 – and arable also fell slightly.’’